Mutual fund data for June: Equity inflows decline despite rise in SIP investments

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Money continued to flow into mutual funds in June 2021, though at a slower pace. The total assets under management of the mutual fund industry jumped to Rs 33.66 lakh crore as on June 30 from Rs 33.05 lakh crore as on May 31. Rising stock markets and buoyant sentiment with a broad-based rally lifting the prices of mid and small caps stocks attracted investors to equity funds.

The number of systematic investment plans (SIP) in various schemes of mutual funds went up to 4.02 crore in June 2021 compared to 3.88 crores in May 2021. The contribution from SIP also went up to Rs 9,155 crore in June 2021 from Rs 8818 crore in May.  SIPs are preferred means of investments for many individual investors. Rising stock markets and falling interest rates have attracted many new investors in search of high returns on their investments to mutual funds.

NS Venkatesh, Chief Executive, AMFI says, “The Mutual Fund industry is witnessing sharp rise in the number of new investors, which has doubled in last four years to 2.39 crores unique investors. Many new investors are seen embracing mutual funds through the SIP route, over other traditional investment avenues.” New SIPs registered which have seen sharp rise, with June 2021 reporting record 21.29 lakh new SIP registrations. SIP AUM at an all-time high and now forming almost 15 per cent of  total industry AUMs and number of SIP accounts breaching 4 crore mark for the first time ever, is reflective of continued retail investor confidence in the mutual fund asset class, he adds.

Though investors continued to invest in mutual funds, the overall inflows declined in June. The equity funds got an inflow of Rs 5,988 crore in June 2021, down from Rs 10,082 crore in May. Mid cap funds got the highest inflows (investments exceeding redemptions) of Rs 1,729 crore. Equity-linked saving funds and value funds lost money with outflows of Rs 791 crore and Rs 114 crore, respectively.

Bond funds saw net inflows of Rs 3,566 crore in June 2021 against outflows of Rs 44,512 crore in May. Money market funds and ultra-short duration funds saw net outflows of Rs 13,987 crore and Rs 2,439 crore. This is in line with the expectation that corporate investors will pull out money to make advance tax payments and to comply with quarter-end cashflow requirements. Floater fund and low duration fund got net inflows of Rs 6,318 crore and Rs 6,273 crore, respectively. Floater funds are seen as better means of investing in a rising interest rate scenario.

“Floater funds continue to receive net positive flows given the limited probability of interest moving down significantly. After witnessing significant outflows on the back of new guidelines around valuations and fund exposure norms for AT1 bonds, the scenario appears to be stabilising for Banking & PSU funds,” said Himanshu Srivastava, Associate Director – Manager Research, Morningstar India. Banking & PSU bond funds received net inflows of Rs 1,357 crore in June.

Among hybrid funds – schemes that invest in varying mix of equity, bonds and gold in line with investment mandate, arbitrage funds saw inflows of Rs 9,059 crore. Dynamic asset allocation funds also known as balanced advantage funds saw net inflows of Rs 2,056 crore. These schemes saw net inflows of Rs 1,362 crore in May.

“The prime objective of the funds in this category is to use valuation models and then dynamically rebalance portfolio between equities and fixed income ensuring better risk-adjusted returns for investors. In the current environment, dynamic or asset allocations funds are a good option for investors,” said Akhil Chaturvedi, Associate Director, Head of Sales & Distribution, Motilal Oswal Asset Management Company.

Ravi Kumar TV, founder of Gaining Ground Investment Services said, “Investors who are unable to digest the uptrend and who think markets are expensive are allocating to balanced advantage funds.” He advises new investors against investing in high-risk investments just because the short term performance is good. “They should understand their risk appetite and timeline of their goals and take decisions. There’s definitely no easy way to create wealth,” he adds.

Gold funds got net inflows of Rs 359 crore in June compared to Rs 287 crore in May. Fund of funds investing overseas received net inflows of Rs 791 crore in June compared to Rs 2,423 crore in previous months. Investors looking for diversification continue to invest in gold and schemes focusing on overseas equities. Benign prices of gold have attracted many investors to gold ETF.